Alistair Darling: With permission, I shall make a statement on the Government's proposals for reforming financial markets. Copies of our proposals are contained in a document that is available in the Vote Office.
	The world economy has been hit by a severe financial crisis, which has resulted in the worst economic downturn for well over 60 years. Its origins lie in failures in the banking system around the world. Financial institutions in many countries simply took on too much risk. They became over-reliant on wholesale funding and too exposed to particular products, and irresponsible pay practices made banks take unnecessary risks.
	It is also clear that some financial institutions appeared to have little appreciation of what was going on inside their own businesses. However, regulators and Governments too must learn from the events of the last two years, and understand better the risks that come from rapid globalisation in the financial system.
	Our economy has a clear need for well-managed, well-functioning banks and financial institutions to perform a vital set of functions, channelling investment and helping people to save and plan for the future. The financial services industry is also a major employer in this country—of over 1 million people—and it will continue to generate wealth for our country in the future.
	Our central objective must be to ensure that, as we come through the downturn, we reform and strengthen our financial system and rebuild it for the future, with consumers that are better informed, financial institutions that are better managed, and markets that are better regulated. The proposals that I will set out today build on our previous reforms to provide a new settlement that is open, competitive and effective and able to meet the needs of both business and families; that inspires trust and confidence on the part of businesses and consumers; that ensures robust regulation that reduces the likelihood of failures without preventing innovation; and that provides effective mechanisms for dealing with the failure of financial institutions should they occur.
	I want to take steps to help consumers make better informed choices. To ensure that they are given access to free impartial financial advice, we will legislate to introduce a national money guidance service and impose a levy on the financial sector to help fund it. We will also legislate to consolidate Financial Services Authority resources to provide separate independent consumer education, setting up a lead provider of consumer information and personal finance education. Consumers will also get more protection, along with a greater right of redress and access to compensation if things go wrong. We will also improve arrangements for depositor protection, including legislation to pre-fund and expand the role of the Financial Services Compensation Scheme.
	Because of the events of the past two years, there are fewer firms in the market providing financial services. It is essential that we retain competitive markets, as they play a key role in providing consumers with value and choice. We want to see greater competition and greater choice for consumers, as well as a bigger role for mutuals and building societies, so the Office of Fair Trading and the FSA will ensure that we maintain competition in the market for financial services. As we come out of this downturn, we need to promote a competitive market that enables new entrants—which may include non-banking institutions—and innovation to benefit consumers and businesses. In that way, we will see better informed consumers who have greater choices in a more competitive market.
	We also need banks and financial institutions that are better managed. We need a change of culture in the banks and their boardrooms, with pay practices that are focused on long-term stability, not short-term profit. The FSA now has powers to penalise banks if their pay policies create unnecessary risk and are not focused on the long-term strength of their institutions. From now on, I will require the FSA to report every year on how financial institutions are complying with their new code of practice for remuneration, and how it will deal with firms that do not comply.
	Bank boards and institutional investors must also become better equipped to do the job and understand their businesses, with more effective risk management and greater independence of non-executives, who must not be afraid to ask searching questions. Next week, Sir David Walker will report on measures that will deliver improved corporate governance at financial institutions, ahead of his final report in the autumn.
	Building on reforms already made, my proposals today will strengthen regulation of the financial system. They will cover three areas: first, new regulatory powers to allow tougher regulation of individual firms; secondly, measures to deal with the potential failure of institutions that could have a significant impact on the economy; and thirdly, a strengthened framework for financial stability to deal with system-wide risks in today's more complex and global markets. We will continue to work with other countries to deal with what is, at heart, a global problem.
	I asked Lord Turner to make recommendations, which the FSA is now implementing, to strengthen the regulatory regime and increase the intensity of supervision. They will strengthen the rules to ensure that banks hold enough capital as a buffer against losses, to introduce a back-stop power ensuring that banks do not over-extend themselves by lending too much when they do not have the strength to do so, and to increase the focus on bank liquidity so that they are able to carry out their business at all times. Those measures will help ensure that financial firms are stronger, more resilient, and better able to serve the needs of our economy.
	I will also introduce legislation in the autumn to give the FSA a new statutory objective for financial stability, and extend its powers to ensure that it has the appropriate rules to deal with different risks in individual banks, and tougher powers and penalties against misconduct, and that it can take account of new developments in the financial sector—including expanding regulation where necessary, for example for systemically important hedge funds.
	We need to ensure our resolution regime can deal with financial institutions of all sizes, including banks that are very large or complex. As these banks are often global, we also need an international mechanism for resolving large multinational banks, and we will bring forward proposals to G20 Finance Ministers when they meet in London in the autumn.
	At home, we can better deal with risks by ensuring that safeguards are in place—for example, by making banks hold capital at a higher level that reflects not only the possibility of failure, but its cost. By introducing higher standards and transparency, the FSA can also improve the functioning of key markets, such as the derivatives markets, so that problems in one institution are less likely to spread through the entire system. The FSA and the Bank of England will make institutions put in place practical resolution plans that can be deployed in the event that they get into difficulties.
	There is, of course, a debate to be had about whether Governments should restrict the size of banks or separate different types of banking, as happened in the United States in the 1930s. I believe that that is a simplistic solution, which fails to take into account the complexity of today's financial system. Small banks as well as large banks can threaten financial stability, as in the case of Northern Rock. Equally, both retail and investment banks, in different parts of the world, have failed in the past year, and it is not only banks that can affect stability, as we saw in the example of the American insurance company AIG. In addition, the approach of one regulator for one category of institution deemed to be systemically important and another regulator for the rest seems to me to miss the point, because what is systemically important can change rapidly, as we have seen in the past two years. Instead, the regulatory system has to recognise and respond to the complexities of individual institutions, and that is what we are doing.
	We also need to strengthen the framework for financial stability. That is a question not only of institutional powers and responsibility, but of better understanding what is happening in the markets. No simple fixes—no institutional reform—could have prevented these problems from occurring. There are different institutional frameworks in countries across the world, but no one model has been successful in insulating a country from the current crisis. Although regulatory arrangements were not the cause of the current problems, we need the right institutions to maintain financial stability and we must ensure that they have the right tools to do the job.
	The move in this country to a single regulator 12 years ago addressed problems with the previous regime of multiple self-regulators, which did not reflect the changing nature of financial markets, and our approach has been adopted by many other countries. However, 10 years on, the world had moved on again; some of the global problems of the past two years went beyond the scope of existing regulation, while others were simply not given sufficient attention by regulators and central banks. In this country, the authorities have been able, over the past year, to deal quickly and effectively with a number of financial stability issues, such as those relating to the Dunfermline building society and Bradford & Bingley, but further reform is now needed.
	We will therefore legislate to set up a new council for financial stability, which will bring together the Bank of England, the FSA and the Treasury. It will not only deal with immediate issues, but will monitor system-wide financial stability and respond to long-term risks as they emerge. That needs to be done on a formal statutory basis. The council will draw on the expertise of the FSA and the Bank, which are and will remain independent of Government, by looking at their regular reports—the financial stability report and the financial risk outlook—and formally responding to their recommendations. In that way, when risks or threats to stability are identified they will be addressed. This body will do that in a way that is transparent and accountable—so that people can see how and why decisions are made—with the regular publication of minutes. The council's responsibilities will be set out in law, with published terms of reference. In discussion with the Treasury Committee and the House, we will consider how to increase accountability through greater parliamentary scrutiny.
	We have already taken significant steps to improve the way in which we monitor and manage risks to the financial system as a whole, through more systematic use of stress testing of financial institutions, for example. The proposals that I am making today will further strengthen our ability to identify and deal with systemic risks, and will ensure that the authorities can be held to account for their actions. We also need to consider what further counter-cyclical measures are needed, in order to allow us to lean against the credit cycle and prevent the build-up of risks that could threaten the stability of the financial system. The principle of leaning against the cycle is easy to agree, but deciding what action to take and when to take it is far more complex. At the moment, there is no clear consensus here or abroad, but I believe that central banks will have an important role to play in that area.
	Today's global market for finance means that new measures can be effective only if they are implemented on a broad international basis, so under our presidency of the G20 we will continue to press for measures to strengthen the international regulatory architecture, building on the proposals agreed in April. In Europe, too, we will argue for enhanced monitoring of system-wide risks, while retaining the crucial link between national regulators and Governments. By working internationally, our efforts can help us deliver more effective supervision of global banks, stronger international standards, and a more responsible global financial services sector.
	We intervened to stabilise the banking system, while retaining a clear view that banks are best managed and owned commercially and not by the Government. We intend to return our stakes in the banks to the private sector, in a way that brings best value to the taxpayer, promotes competition and maintains stability, and we will use the proceeds to cut Government debt. We are empowering consumers, supporting better corporate governance and strengthening regulation, so that our financial sector can continue to be an engine of prosperity. I commend this statement to the House.

George Osborne: I thank the Chancellor for his statement, although frankly almost all of it was splashed over the front pages of today's newspapers. Once again, Parliament comes last, instead of coming first.
	Of course, there are some elements of the White Paper that we welcome: the improved consumer advice; David Walker's report on corporate governance, to which we look forward; a much better resolution regime for failed banks, which is clearly necessary; and the Chancellor's remarks on pay and bonuses, although he could have set a better example with the pay and bonus package for the chief executive of RBS. However, in most part, this White Paper is a totally inadequate response to what has happened over the last two years.
	For a start, the White Paper contains no serious analysis of what went wrong. I received a copy of it only 20 minutes ago, during Prime Minister's questions, but the only admission that I can see of any responsibility for what happened is the sentence that states that
	"the crisis has shown that aspects of prudential and macro-prudential supervision...were insufficient."
	That is the understatement of the century, given that half the British banking system has had to be nationalised. It also ducks every difficult question that needs to be addressed if we are to protect our society and our economy from a repeat of the mistakes that have caused such trouble. How do we replace the failed tripartite regime? What tools do we need to stop the excessive debt levels that did so much damage to our economy? How do we ensure that we have a banking system that competes across the world, and offers families and small businesses in this country the services that they are currently denied in this credit crunch, without the British taxpayer picking up the bill for the mistakes that are made? None of those difficult questions is properly addressed today; every single one is left to the next Government to deal with. It is more of a white flag than a White Paper—a complete surrender of this Government's responsibility to fix the system for regulating the City that they created and which so spectacularly failed.
	Let me press the Chancellor on some specifics on the conduct and content of regulation. First, on the tripartite regime, he must see how dysfunctional it has become. Institutional jealousies and blurred lines of responsibility mean that everyone gets involved but no one is in charge. Let us remember where this all began—with the arrogant decision from the new Chancellor in 1997, without warning or consultation, and in the teeth of the opposition of the late Eddie George, to remove banking supervision from the Bank of England. My right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley), the then Shadow Chancellor, warned from this Dispatch Box that it would leave no one responsible for the liquidity of the banking system or guarding against systemic collapse. Sadly, that prophecy turned out to be all too true. No one was responsible for liquidity. No one was looking at systemic risk. Even the FSA itself admits that it took its eye off prudential supervision. When the crunch came over Northern Rock, no one knew who was in charge. Almost two years later, we still do not know who is in charge. The Chancellor should have come here today to bury the tripartite system, not to praise it. The only thing that stops him is the vanity of the Prime Minister who refuses to admit that he made such a fundamental mistake.
	The same applies to the content of regulation. The first half of Lord Turner's report contains the most damning critique of what went wrong with this Government's economic policy. He points to the "major and continued macro-imbalances" in the British economy. He says that the failure to spot this was
	"one of the crucial failures of the years running up to the financial crisis",
	and he says that the
	"vital activity of macro-prudential analysis...fell between two stools".
	What does this White Paper propose to do with that vital activity in future? It puts it between two stools again. After two years of thinking in the Treasury—wait for it—we are going to have a council on financial stability that will bring together the Treasury, the Bank of England and the FSA. I thought that that was what the tripartite regime was supposed to be about all along. We do not need another divided committee. We do not want more divided responsibilities. We need clear lines of accountability that run all the way to Threadneedle street. They do not exist at present.
	Instead of clarity, what we get from the Government is confusion. The Governor of the Bank of England appeared before the Select Committee on the Treasury two weeks ago, and he said:
	"We were given a statutory responsibility for financial stability in the Banking Act, and the question...to which I have not really received any adequate answer from anywhere, was: what exactly is it that people expect the Bank of England to do?"
	We are none the wiser after this White Paper. Perhaps it would have helped if the Chancellor had shown the White Paper in draft to the Governor of the Bank of England two or three weeks ago instead of in recent days.
	Is it not absolutely clear that the Bank of England now has to be given not just the responsibility but the tools for macro-prudential regulation? Can the Chancellor confirm that there is not a single new power for the Bank of England in the White Paper? The Bank of England should have the power to call time on debt, as we suggested almost a year ago; it should be able to set counter-cyclical capital rules in conjunction with other countries—and, by the way, that would be a much better use of international co-operation than the current proposals from the European Commission, which are ill conceived and damaging to the UK—and it should have the statutory powers to intervene when the structure of a financial institution threatens the whole economy, so that, in the Governor's words, it can force its "sermons" to be listened to.
	The Bank of England cannot do any of those things unless it has the experience and knowledge of their day-to-day regulation. Let me make it clear to the Chancellor today that the next Conservative Government will abolish the tripartite system, and let me tell Parliament first—unlike his policy—that we will put the Bank of England in charge of the prudential supervision of our banks, our building societies and our other significant financial institutions. We have learned from this crisis the old truth that one cannot separate central banking from the supervision of the financial system and that sound regulation is not just about a checklist of rules but about the authority to exercise judgment and to see the bigger picture.
	Sitting alongside a stronger Bank of England we will have a powerful regulator to protect consumers—a regulator with the clout and focus not just to add more health warnings alongside the acres of small print that already come with financial products but to stamp out unfair practices such as mis-sold payment protection insurance and excessive bank charges. We will set out the details of that in our own alternative White Paper later this month. Will not the choice be clear then?
	We have today a submission from the Labour party, which will be implemented in full only if it is re-elected, and proposals from the Conservative party. The Labour party wants to stick with the financial system that failed us, which it created. We propose to overhaul that system and put the Bank of England in charge. People will know at the next election that if they want to change the way in which the City and our banks are regulated, they need to change their Government.

John McFall: The Treasury Committee has made a detailed examination of the banking crisis. It found nothing wrong with the architecture of the tripartite authority, but there was a lot wrong with the warnings given by the Bank of England the FSA, which were too weak. I therefore welcome the establishment of the proposed council for financial stability. We need it to have strength and grit, and I am looking for reassurance from the Chancellor in that regard.
	At the core of the matter is the restoration of trust and confidence. Will my right hon. Friend support the establishment of a banking commission, with a membership of lay people and not those representing narrow City interests? That would ensure that the future of the financial sector served the wider needs of society and individuals, and not just the City's narrow needs.

Peter Lilley: Does the Chancellor recognise that the City of London has become the financial capital of the world—to the immense benefit of this country—partly because we have always had a system of prudential supervision that was strong, flexible, unified and not rigidly bureaucratic? As my hon. Friend the shadow Chancellor pointed out—and as was predicted from the Conservative Benches at the time—that was undermined by the tripartite system. Why, then, is the right hon. Gentleman handing power over to countries with financial systems that have been less successful than ours? Most of our partners on the continent have much more rigidly bureaucratic regulation of their financial systems. Is it not wrong to hand ultimate power over our system to them?

Alistair Darling: I have had many discussions with the Governor of the Bank over the past couple of years about these things, and I will have many discussions with him in advance of the preparation of the White Paper. In particular, I have talked to him about the role of the Bank. If we further develop the powers that may be necessary to lean against credit cycles, I have made it clear that the Bank of England is the obvious place to go. However, the point that I was making is that currently the power to increase or reduce capital requirements, which is the most obvious brake one could put on financial institutions, lies with the FSA. I do not want to end up with a situation in which banks do not know whether the FSA governs their capital requirements, or the Bank of England does. The Bank does not want to regulate individual banking institutions and so on. People can hold different view about that, but I want to make sure there is a clear delineation of who is responsible for what, so that we can better hold people to account for what they do.

Nick Palmer: I beg to move,
	That leave be given to bring in a Bill to make provision for residents of care homes to keep domestic pets in certain circumstances; and for connected purposes.
	In addition to the subject of the title of the Bill, I propose to discuss sheltered accommodation. I am pleased to be able to present this Bill today and delighted to have received so much cross-party support for what it outlines from colleagues, including the shadow spokesmen for animal welfare and for elderly people. The issue touches every constituency throughout the UK and, given a growing elderly population, will need to be addressed.
	Superficially, the issue appears to be about animal welfare, and I should say that have been involved in animal welfare organisations for even longer than I have been a member of the Labour party, which is 40 years. Indeed, Alexander Solzhenitsyn once made the relevant connection, saying:
	"Nowadays we don't think much of a man's love for an animal; we laugh at people who are attached to cats. But if we stop loving animals, aren't we bound to stop loving humans too?"
	Separate from that, however, I see the issue as one about the right of elderly people to live their lives as they wish, without too much well meant regulation of every detail from the moment that they leave independent accommodation to the moment that they move to sheltered accommodation or care.
	The problem is simply stated: when people move into sheltered accommodation or into care, there is no consistent policy allowing them to take a pet with them. As a direct result, in the most recent year for which statistics are available, 38,000 healthy pets had to be put down and a further 100,000 had to be given up by their owners. Many of those pets will have been put down after an attempt to re-home them.
	Moving home is stressful for anyone. Moving from one's long-standing home into sheltered or care environments is often traumatic, as one separates oneself from independent life. If we add to that having to part from one's pet and, even, having to order it to be put down, we add distress and guilt, and there is a very clear case for Parliament to help in avoiding that if it can.
	Practice varies enormously throughout Britain, but there are numerous examples of successful schemes that allow pets to remain with their owners, and that should be the norm for sheltered housing. The fact that one is now living in a warden-aided flat should not remove one's right to make the choice to keep a pet. Pets provide an important source of physical, emotional and social support for many older people, and there is extensive evidence of improved cardiovascular and mental health and other health benefits from the relationship with a familiar animal. It mitigates the loneliness of many people in old age and provides an avenue for nurturing, caring and taking responsibility for others, and maintains the sense of still feeling useful.
	I have discovered that many older people find that when it is time to move into care, there are wildly different practices throughout the country, making for a postcode lottery if one wants to keep an animal. There are no legal obligations on residential homes in that respect, and that is in stark contrast to other countries, including the USA, Germany, Greece, France and Switzerland, all of which have introduced legislation to ensure that older people have the right to keep or maintain contact with animals, whether those people live independently in the community, in sheltered accommodation or in long-term homes.
	As far back as 1970, France legislated for pets to be allowed in all public and private housing, provided that the pet is properly cared for and not causing a nuisance. In 1983, the USA passed a national law permitting older and disabled people to keep pets in housing that received federal funding. The Society for Companion Animal Studies, supported by the Pet Food Manufacturers' Association, both of which have been extremely helpful in preparing the Bill, has published research to assess the scale of the problem in the UK. It found that 65 per cent. of care homes have no formal written policy whatever. Of those that do, 29 per cent. permit pet ownership, but more than half—54 per cent.—specifically exclude cats and dogs.
	I know from correspondence from constituents that there are genuine concerns about pets going with their owners into shared or nursing care accommodation relating to pets not mixing well and about adequate exercise for dogs; responsibility for the payment of veterinary care when it becomes necessary; and the fact that older residents might be frightened of or allergic to animals. I am not arguing for a blanket policy, stating that every pet, from an anaconda to a Rottweiler, has to be admitted; I am arguing for a basic presumption that pets be permitted—subject to appropriate discussion about all the eventualities that can arise, and provided that they do not cause a nuisance to other residents.
	Care providers would be understandably and rightly concerned if an extra burden was placed on them. However, evidence from experience is that an intelligent policy allowing animals actually reduces the burden on staff; residents who would otherwise make frequent demands on staff time often focus on their companion animals for much of the day.
	Best practice guidelines are available for any authority that changes its policy. Wandsworth council has been proactive on the issue; its previous policy effectively ruled out pets in its accommodation, but its current policy makes the keeping of pets normally permissible. The feedback has been entirely positive. The council has told me that it would be glad to advise other authorities that might be considering a similar change. Organisations such as Help the Aged, Age Concern, Pathway and the Anchor Housing Trust have recommended guidelines that can help.
	The Cinnamon Trust has gone beyond that and produced a comprehensive publication of pet-friendly homes; it gives ratings to the top 500 establishments visited by the trust's assessors. I was delighted to visit Elm House nursing home in my constituency of Broxtowe. It has a five-star rating for the criterion "Welcoming any owner and their pet with caring, friendly staff". I saw the dramatic effects that the home's cat, budgerigar and visiting pets have on the lives and reactions of long-term residents with physical and mental disabilities.
	The Cinnamon Trust also has a national network of more than 10,000 community service volunteers who provide practical help when day-to-day care is an issue. Volunteers from another group, Canine Concern, bring in formerly homeless dogs that they have adopted as individual pets to visit patients. The animals are a positive therapy in recovery; as the National Institute for Health and Clinical Excellence has recognised, that can often be the case.
	In preparing the Bill, I have been helped by many colleagues with personal experiences. My hon. Friend the Member for Colne Valley (Kali Mountford) tells me that her mother was allowed a visit from her dog only once after she went into care, and would have liked so much to have had more contact with her companion from the years before. My hon. Friend the Member for Sheffield, Heeley (Meg Munn) was a social services manager in an area where one Sue Ryder home regularly brought in a much-loved cat to cheer up the residents.
	My Bill will address a problem that remains general. Today I met Brenda Eustace, an elderly resident in London who was unable to find a home willing to take her small pet dog and who, as a result, could not go into care. We need to end the postcode lottery and to come to the aid of elderly people faced with this trauma. I commend the Bill to the House.
	 Question put and agreed to.
	 Ordered,
	That Dr. Nick Palmer, Miss Ann Widdecombe, Mr. Ian Cawsey, Mr. David Blunkett, Meg Munn, Andrew Rosindell, Mrs. Linda Riordan, Paul Flynn, Mr. Denis MacShane, Mr. Roger Gale, Ann Clwyd and Judy Mallaber present the Bill.
	Dr. Nick Palmer accordingly presented the Bill.
	 Bill read the First time; to be read a Second time on Friday 16 October and to be printed (Bill 129).

Greg Hands: The hon. Lady makes precisely my point, perhaps somewhat more succinctly than I am making it. By not creating an environmental tax but instead introducing an arbitrary and discriminatory schedule, the Government are making a huge mistake.
	I have one final point about south Asia. Flights to Kashmir, if there were such things—it is quite possible that there could be in future, or that there could be charter flights—would leave the airline concerned having to make the intensely political decision as to whether its destination was in band 2, as part of Pakistan, or band 3, as part of India.
	The schedule sets out a crazy scheme. Destinations such as the Caribbean, India, Bangladesh and Sri Lanka are some of the biggest routes for VFR passengers, many of whom have said that the Government are introducing deliberate discrimination against the Commonwealth. As has been mentioned, their approach has provoked uproar in the Caribbean. The Jamaican Prime Minister, Bruce Golding, whom I have mentioned, and Tourism Minister Ed Bartlett made a special visit to the UK purely about this one issue during the Committee stage, to urge against the Government's new four-zone banding scheme. They pointed out that there was no environmental or economic reason why flights to the Caribbean should be taxed 25 per cent. higher than those to Florida, or to the US or Canadian west coast.
	Interestingly, the new 787 Dreamliner will be able to fly directly from London to Hawaii, yet those flights, which would be some 7,200 miles, will attract 25 per cent. less APD than flights to Kingston, Jamaica, which, at 4,693 miles, are 50 per cent. shorter in distance. As I understand it, 60,000 members of the UK Caribbean diaspora have signed a petition against the Government's plans, which are an extremely unpopular measure.
	We debated this matter a little in the Public Bill Committee. The last but one Exchequer Secretary, the hon. Member for Wallasey (Angela Eagle), did not seem to understand what hurt and upset her comments about the Caribbean would cause. She said in response to my speech:
	"He mentioned Caribbean communities. We are aware of their circumstances and we are listening to their representations. Clearly, it mainly involves the anomaly of Hawaii." ——[ Official Report, Finance Public Bill Committee, 2 June 2009; c. 167.]
	I mentioned Hawaii merely because that is the most extreme version of the anomaly, but the anomaly is not Hawaii, but the four-zone schedule covering the whole world. Anyone who has a sizeable Caribbean community in their constituency—I have one of the largest—will know that the Caribbean tourism market, even ignoring VFR flights for a moment, competes mainly with Florida. The Caribbean will now be taxed at 25 per cent. more than its US competitor. Those who visit friends and family in the Caribbean will be similarly clobbered.
	To return to the hon. Member for Wallasey and her shaky geography, she explained how we managed to have a position whereby Russia was divided into two zones. I asked her why we could not simply divide the US, for example, into two zones. She said:
	"Well, clearly the US is a slightly different issue as its main land mass is much shorter than Russia's. If one includes Honolulu, it gets slightly longer."
	That is extraordinary, at implies that Honolulu is somehow on the main US land mass. She said:
	"If one did it on a line between Boston and Honolulu the split would be somewhere in the middle of the Ocean." ——[ Official Report, Finance Public Bill Committee, 2 June 2009; c. 166-167.]
	I was thinking of getting out a globe, if we were allowed visual aids in Committee, to show that the halfway point between Boston and Honolulu was nowhere near any ocean, but right in the middle of the United States.

Diane Abbott: The hon. Gentleman may think is an anomalous system, but a Jamaican nurse who has saved for two years to fly home and finds that she has to pay substantially more in air passenger duty than someone who is flying all the way to Los Angeles would think the system looked pretty arbitrary.

Sarah McCarthy-Fry: It is 0.6 million tonnes of carbon dioxide in 2011-12.
	My hon. Friends the Members for Hackney, North and Stoke Newington (Ms Abbott) and for Walthamstow (Mr. Gerrard) and the hon. Members for Brent, East (Sarah Teather) and for Taunton (Mr. Browne) referred to the Caribbean. I assure hon. Members that I have carefully considered the many representations I have received in respect of the Caribbean, and I will respond later to some of the alternative suggestions that have been made in the context of our reformed APD. Without seeking to undermine the argument of the hon. Member for Brent, East, I would like to correct a point of fact. She said, I think, that there would be an additional £300 in 2011-12, but it is, of course, an additional £140, and £300 is the total.
	In the context of this amendment, there is absolutely no reason to assume that moving to a per-plane tax would result in less tax on flights to the Caribbean. In fact, implementing a per-plane tax, as consulted on in 2008, would have resulted in more tax being paid on flights to the Caribbean than under the reformed APD. As I have said, I will address later some of the alternatives that have been suggested such as distance flown, alternative bandings and proxies other than capital cities, but I shall first explain why we have chosen the banding system.
	In retaining APD, the Government recognised that the system could improve the environmental signals it provides. The responses to the consultation for the per-plane tax highlighted that aviation taxation should recognise distance flown as a factor. As part of the strengthening of the environmental signal in APD, destinations have been banded in a straightforward, transparent and administratively simple way.

Greg Hands: This has been a wide-ranging and extremely helpful debate on amendment 1, and we have heard from a significant number of diverse speakers on a number of different topics. A number of common themes emerged, the main one being the unworkability of the Government's clause and schedule that we are discussing. The hon. Member for Hackney, North and Stoke Newington spoke passionately and with great knowledge, making powerful points about Caribbean communities and the need to have a more environmental basis to this taxation that I had also made. The hon. Member for Taunton (Mr. Browne) also made a number of important points about the crudeness of schedules 5 and 5A, as well as a number of more general points with which Conservative Members agree.
	The hon. Member for Walthamstow (Mr. Gerrard) commented on the actual distance flown, which I know we discussed at the meeting of the all-party group on the Caribbean. I was interested in the Minister's response that she is looking at ways of reforming the Chicago convention. I would be grateful if she could update the House, at an appropriate time, on how those negotiations are proceeding. My hon. Friend the Member for Wellingborough (Mr. Bone) made similar points about the Caribbean and India, well illustrated with a letter from his constituent, one of the 60,000 people who have signed the petition and written to their MPs.
	The reasons given for rejecting the plane tax amendment are flimsy, as we have seen from the Minister's response and the Government's consultation document. We can have no confidence in the Government's reasoning, which shows a confused logic on whether this is an environmental tax or purely revenue-raising. Several hon. Members raised serious concerns about the particulars and the generality of the Government's proposals, and we would urge a rethink before it is too late. Having said that, we had a Division on this matter in Committee and we are not minded to do so again today, given that we are already two hours into today's proceedings and there are several more groups on the amendment paper. I therefore beg to ask leave to withdraw the amendment.
	 Amendment, by leave, withdrawn.

John Gummer: I can imagine the noble Lord in many circumstances, but I had not thought of the bingo club as one of his habitual areas of interest. However, I do not want to make a personal comment about Lord Mandelson, although of course the opportunities are enormous.
	There is a continuing theme of insensitivity throughout the whole Finance Bill. The Government seem to have no understanding of how what they are proposing affect will ordinary people. I cannot understand that. The Minister is somebody we all admire; we find her interventions most interesting and she is always most courteous in giving way. I cannot believe that she really wants to subsidise the people who can afford to go to casinos by charging more to the people who go to bingo clubs, and yet she has been defending a change in the taxation system that means that the poorest people are subsiding those who are richer. That does not seem very sensible, but she has defended it. No doubt—I fear this is inevitable—she will get up to explain why it is basic to Labour doctrine that the poor shall subsidise the rich. I find that pretty obnoxious.
	Yesterday there was a very impressive speech—I am sure that you heard it, Mr. Deputy Speaker—by the right hon. Member for Birkenhead (Mr. Field). The only thing that I disagreed with him about was his belief that only Labour Members have the poor at heart. I hope that a much larger constituency in this House believes that the reason we are here is to defend those who are least able to defend themselves, not only in terms of their liberties but their ability to exist comfortably in society, to earn a decent living, and to maintain their families in decency. That is why I came into this House. I do not like bullies of any kind; I want to stand up for the bullied rather than the bullies. This Government are constantly standing up for the people who can stand up for themselves, and not standing up for those who cannot. That is why I stand up for a lot of people whose enthusiasm I do not share, in the belief that they should be able to have it and be protected by this House in doing so. We should not only try to ensure that they pay the same level of duty as on other forms of betting but suggest that it might even be a comparatively lower one.
	These people have already been hit very hard. I do not think the Government have ever really come to terms with some of the by-blows of their decision on smoking in public places. As an enthusiast for the environment, I am fed up with the fact that we have increased emissions in this country caused by outdoor heating that enables people to smoke outside pubs because nobody was prepared to take the sensible view that a room where no one was serving could be put aside for those who wanted to smoke. No, that could not be done—that was against the theology of the policy—so now we warm the heavens in order that people can smoke outside.
	We must also face the fact that the smoking ban has had a direct effect on bingo clubs. I rather like a former Home Secretary who got into terrible trouble for suggesting that the ban would affect his poorest constituents most. I am not arguing that case again; I am merely saying that it has had a real effect on areas where people with limited means, and often with homes that are less comfortable than those of the Exchequer Secretary and her ministerial colleagues, gather together somewhere warm, pleasant and light where they can enjoy themselves. Now they cannot smoke, which may be good for them, but if we are also going to tax them heavily on their bingo because that might be good for them, that is an aspect of the nanny state that I could well do without.
	It seems to me that if my constituents want to play bingo, they should be able to do so at a cost that is as low as we can provide for. The taxation should therefore at least be fair, which argues for a lower rate than forms of gambling that only people with greater resources can indulge in.
	The Government are doing a most peculiar thing in first lauding themselves for doing something about double taxation and then proceeding to ensure that they make up for it by having bigger single taxation. That does not seem to me a wildly clever argument, because it does not convince anybody. Nobody thinks that the Government are actually being helpful; people just think that they are clearing up an embarrassing anomaly and deciding that they will get the money back in any case.
	How much more sensible it would be if the Government came to the House and said, "We're going to tax the rich more than we do the poor. We're going to put up the tax on casinos sufficiently to make up for the taxation reduction that we're going to make on bingo halls." That is the sort of thing that I would expect from a Labour Government, but we now have to look to the Conservatives for every kind of social support for which we used to look to the Labour Benches. That is true right across the board. On every criminal justice Bill, I have time and again voted to the left of the Labour party. When we came to discuss the Iraq war, I voted against it because I thought it was wrong, and the Labour party voted for it. Now I have to vote for the poor on bingo, because the Labour party wants to tax them more.
	What is really happening is that we are seeing the social revolution that will end on 8 May or whenever it is, when a Conservative Government committed to the poor replace a Labour Government committed to the rich. The public will welcome that with open arms.

Greg Hands: I thank my hon. Friend for that intervention. We touched on that issue in the debate on clause 114, which covers the duty on online gaming. As was pointed out, there is now an incredible anomaly, in that playing online bingo will now attract far less tax. Surely we should all recognise the social benefits of bingo clubs for their clientele. It is therefore an incredible anomaly that we should be taxing the online version significantly less than the club version.
	The Bill's consideration in Committee of the whole House was, as I said, some two months and two Exchequer Secretaries ago, and we have seen some amazing figures since then. During the debate on clause 20 in May, I questioned the Government's figures for the cost of removing VAT from participation fees—in other words, the theoretical cost of the linked clause 112, which we have already debated. I was referring to the cost assuming that VAT was being paid in all areas.
	We have now obtained more information on how the Government arrived at their figure of £50 million, through the answers to some written questions. On 18 May, the Financial Secretary to the Treasury replied that the cost of removing VAT on main-stage bingo—the standard form of the game—was some £20 million. In one of her few acts during her short-lived nine-day reign in the Treasury, the hon. Member for Burnley (Kitty Ussher), the current Minister's immediate predecessor, added on 10 June that the cost of removing VAT on interval bingo—the newer form that the High Court ruled on in the VAT tribunal case—was some £25 million. That adds up to a total of £45 million. As I said in the Public Bill Committee, I therefore assumed that the remaining £5 million of the £50 million related to participation fees on equal chance games other than bingo—principally poker.
	That is the estimate relating to the £50 million in the Red Book, as I see it. In any case, the estimates for 2009-10 back up the argument that I made in the debates on clauses 20 and 112 that the industry will, in practice, pay more as a result of all the measures in the Finance Bill. We are not aware of any major operator paying VAT on interval bingo and, after the court ruling, it is hard to believe that any operator would even contemplate doing so. As I have said, a number were also withholding VAT receipts on main-stage bingo, and that number is now likely to swell. It is reasonable to conclude, therefore, that actual receipts would have been below £20 million for 2009-10, before the court ruling, and that they could now be zero.
	However, the Red Book shows that the increase in bingo duty is expected to raise £35 million. Far from reducing the effective tax rate, as the Minister's pre-predecessor insisted, the Government's proposals appear to constitute a tax hike of at least £15 million. This matter cropped up yet again in the Budget debate, and the Financial Secretary was wide of the mark when he said:
	"Overall, the announcements in the Budget on the taxation of bingo are welcome to the industry."—[ Official Report, 23 April 2009; Vol. 491, c. 434.]
	I found that absolutely extraordinary, but the point is that no one really knows for sure, because the Government refuse to be definitive.
	The current Exchequer Secretary, who is with us today, told us during the last sitting of the Public Bill Committee on 25 June:
	"The £50 million is made up of the cost of recovering VAT on mainstage bingo, interval bingo and card rooms. The roundings are to the nearest £5 million, so although £20 million, £25 million and £5 million are not exact figures, they show the proportions." ——[ Official Report, Finance Public Bill Committee, 25 June 2009; c. 618.]
	That is an extraordinary lesson in mathematics: figures of £5 million, £20 million and £25 million can all be subject to a rounding error of £5 million. Yet that is what the Red Book calculations are based on. It is absolutely amazing.

Don Foster: In many ways, this is an excellent continuation of the debate that we had on 13 May. Indeed, we have heard some of the old favourites—the excellent introduction by the hon. Member for Dundee, East (Stewart Hosie) and the passionate speech by the hon. Member for Barnsley, Central (Mr. Illsley). There has also been some welcome new blood in the debate—not least the right hon. Member for Suffolk, Coastal (Mr. Gummer), who, I suspect, will be bitterly disappointed by those on his Front Bench in a few minutes when we come to vote.
	Two things have been a common theme in the debate this evening. First, there is total incomprehension among people on both sides of the House of what the Government are proposing to do about bingo. Not a single person so far has spoken in support of what they advocate, whereas there has been a great deal of support for the variety of amendments before us. Secondly, it has come across loud and clear that not only do people oppose what the Government are doing but there is genuine passion for recognising the importance of bingo clubs in our communities and supporting them. Everyone who has spoken has shown understanding of the importance of what the roughly 600 bingo clubs provide in our communities. They provide much-loved entertainment—largely, as my hon. Friend the Member for Taunton (Mr. Browne), who spoke from our Front Bench, has pointed out, for women, older people and people who are less well off. As we have all said, it is crucial to try to maintain that soft form of gambling so that we do not drive people into much harder forms.
	The other thing that has come out in the debate is the fact that there is some surprise at the Government's incompetence as regards getting the figures right. Let us look, as many have done already, at page 153 of the Red Book. It is very clear what the Government think will happen. There is the very welcome removal of VAT on participation—incidentally, may I be the only one to pay tribute today to the Government for helping bingo by increasing the number of machines that clubs can have? However, that removal of VAT, the Government claim, will save the industry £50 million in the first year rising to 60 million in 2011-12. The bingo industry will then lose, through the increase in bingo duty, from 15 to 22 per cent. Many people have pointed out that those figures are meant to be an estimate; frankly, they are total fantasy. We know what is happening as a result of the Government's loss at the EU tribunal in respect of duty on interval bingo, gaming bingo and so on. Many of the companies are not paying that duty. The Government's figures are way out of order.
	We have not yet had an answer to the question that the hon. Member for Hammersmith and Fulham (Mr. Hands) asked the Minister about whether the Government have taken account of irrecoverable VAT, but on the assumption that they have not, which I suspect is the case, that is a further example of the figures being way out of line.
	The Government have done something that is incomprehensible because it will cause further damage to the bingo industry. Thirty clubs have closed in the past year, and more than twice as many since 2007. Only last week Gala, one of the major companies, announced that a further five clubs would close, and it explained to the Treasury that that was largely because of the taxation issue. No one can understand why the Government are doing something that could be so damaging to something so loved by people in our communities.
	The right hon. Member for Suffolk, Coastal, among others, made it clear that there is another matter about which there is total incomprehension. Why have the Government failed to grasp the nettle of dealing with the different issues raised by the various forms of gambling in this country? Soft forms of gambling like bingo lead to very little addiction, but the harder forms like online gambling lead to high levels of addiction. Why can we not have a differential taxation policy, with a lower rate for soft forms of gambling and a higher one for the harder forms?
	My hon. Friend the Member for Taunton was wrong about one thing. He said that online bingo was taxed at 15 per cent., but the truth is that it is rarely taxed at all, because the vast bulk of it is run through offshore websites that pay no tax in this country. Even if they are subject to European Economic Area regulation, or whitelisting, they do not contribute to the process. They certainly do not make any contribution, as they should, to the costs of research, education and treatment.
	We need a differential tax regime. We certainly should not put the tax up to 22 per cent.; it should stay at 15 per cent. As the protesters in Trafalgar square and Westminster said recently, "One and five, keep bingo alive!"

Colin Breed: I just wish to make a few comments on the charter and the senior accounting officer. These wide-ranging amendments cover a variety of issues, both technical and probing, and I am sure that the Minister will respond to them. I am grateful to my hon. Friend the Member for Somerton and Frome (Mr. Heath) for raising specifically the issue of what the charter should cover, as the charter is an important aspect of this Bill. The Minister will recall that the Government announced a consultation on a taxpayers' charter last year and we were given a ministerial statement on the matter. During the Report stage of last year's Finance Bill, my Liberal Democrat colleagues and I tabled a new clause entitled "Taxpayers Charter". Of course, it did not succeed, but we are grateful that something similar has appeared in this Bill.
	It is important that taxpayers' statutory rights, including the basic right of appeal against actions or decisions, is enshrined in some way, and the same applies in respect of taxpayers' statutory duties—I am thinking of provisions relating to notice period requirements, documents that HMRC has a right to access and penalties for failure to comply. We are very happy about that arrangement, but clause 91 would insert a new section into the Commissioners for Revenue and Customs Act 2005. This clause only pays lip service to the call for a charter. In reality, it provides little or no protection or certainty for the taxpayer and, indeed, pays the taxpayer little regard. The charter cannot be independent if HMRC is solely to decide its content. I appreciate the amendment that the official Opposition have tabled to ensure that the House debates that issue, because it is important.
	We would have liked the Government to consult on the content of the charter well before now. We have spent quite a lot of time consulting on stricter penalty regimes and very little on protecting the taxpayer. As I understand it, the charter will not be in statute—only the power to create a charter. That is a slight disappointment. The Bill says that the standards and values are to be "aspired" to, but there will be no way of requiring HMRC to meet and maintain the standards that it should already have achieved. The review of HMRC's adherence to the charter would not require any consequential action. If HMRC fails to meet the aspirations in the charter, there is no provision to discipline it or enable parliamentary pressure to be applied,
	While we welcome a charter setting out the rights and duties of the taxpayer, no protection is afforded to the individual. In fact, the Government have spun reforming ideas around to suit the interests of HMRC, rather than to protect the taxpayer. We do not have a taxpayers charter, but an HMRC charter—not what was envisaged at all. Some of our concerns are shared by professional bodies. The Institute of Chartered Accountants says:
	"The current wording of the clause does not meet the needs of taxpayers. Firstly, it is drafted in terms of HMRC's 'behaviour and values' rather than the rights of the taxpayer. Secondly, it does not make adequate provision for oversight and review."
	We have spent much time in recent Finance Bills extending the powers of HMRC in various ways, including the right to impose penalties, to make inspections, to collect data and to charge interest on late payments. Everything has been going HMRC's way, and this was an opportunity to try to redress the situation, but the Government have failed to do so.
	Clause 92 concerns senior accounting officers. I can understand the Government's approach, which would identify someone who would be responsible for ensuring that the accounting systems are adequate and accurate for tax reporting. It refers to the preparation and submission of returns to HMRC, not tax figures in financial statements. The SAO must ensure that tax returns are timely and procedures are adequate for accurate tax reporting. The adequacy of the systems must be certified annually, because the tax code changes with alarming regularity. Systems have to be changed almost annually to ensure that the data in returns are accurate. The SAO will be personally liable for a penalty of up to £5,000 for careless or deliberate failure to comply with the rules. According to the impact assessment, some 2,000 individuals will need to comply with this new regime.
	The regime is supposed to target large companies, but the definition of large is not exact. Indeed, the Government have tabled some technical amendments to try to address that issue and ensure that we are targeting the right sort of large companies. That lack of definition is slightly disappointing in provisions that will charge individuals with some heavy responsibilities, for which the penalties can be significant—not only in financial terms, but in professional terms, because a person's ability to retain their job or get another one might be limited if they were found liable in this respect. It is important that the Government have tight definitions and an understanding so that those individuals—it has been assessed that there are about 2,000 of them—have clear and accurate information about what their responsibilities are and what they have to do, and do not find themselves falling foul of inaccurate definitions or definitions that can be construed or introduced in different ways that could disadvantage them in their work.
	Finally, on the issue of cost, although I can understand why the Government are formulating this proposal, there are serious concerns that businesses will face quite a considerable increase in costs, bearing in mind the potential of the expected yield. Do we have real proportionality? Will the costs incurred by businesses up and down the country be proportionate to what the expected yield might ultimately be? I would be grateful if the Minister could comment on that.

Stephen Timms: I beg to move, That the Bill be now read the Third time.
	Let me begin by thanking all hon. Members who have participated in the various stages of this Bill, from Second Reading in early May through to the Committee stage, which all of us who were involved hugely enjoyed, and to debates yesterday and today on Report. The Bill has benefited in a number of respects from the scrutiny that it has received.
	The world economy is experiencing the worst conditions for generations. We are taking action to help families and businesses so that we can come through the downturn sooner and stronger. The Bill introduces measures to support the economy and the public finances, and measures to continue the modernisation of the tax system. Together with other policies across Government, it will help to put Britain firmly on the path to recovery.
	Help is needed to support the economy through the current problems, and the Bill will help to implement the temporary VAT cut until the end of the year—a fiscal stimulus of more than £11 billion into the economy that has supported households, from those on higher incomes to those receiving benefits. Businesses also benefit from additional household spending. In addition, the exempt sector—including charities and financial services, health and education—is benefiting directly from lower VAT costs. There has been growing recognition that the measure is working.
	The freeze in the small companies' rate of corporation tax will help more than 800,000 companies. The temporary extension of the loss carry-back rules, benefiting more than 140,000 businesses, will help many viable firms that face cash-flow difficulties. The Bill is helping to support investment by temporarily doubling, to 40 per cent., capital allowances for businesses investing now. That will benefit a further 60,000 businesses, together with the business payment support scheme, as part of which 160,000 agreements have already been reached with business, deferring tax payments of £2.7billion.
	The Bill provides real help for businesses now, targeting it at those in most need while encouraging investment for growth in the future. It also introduces measures to support the public finances through the medium term, which is a critically important task for us to accomplish. It tackles the challenges faced by the economy, but also provides for changes that will support businesses and individuals in the medium term. The high level of consultation, both formal and informal, that we carried out in preparing the Bill is reflected in the World Bank's "Doing Business 2009" survey, which ranks the UK sixth in the world for ease of doing business. The measures in the Bill are good for individuals, good for business and good for the economy as a whole. I commend the Bill to the House.

Sarah McCarthy-Fry: Very few pensioners will have pensions anywhere near the lifetime allowance, and we have to take that fact into account. We must also take into account the fact that it would add complexity, a point that I will develop later. Our rules must balance what will affect a few individuals against the complexity that would affect many more pensioners. The decision about going to the maximum 25 per cent. is a matter for individual pension schemes.
	I sympathise with my hon. Friend's concerns on this matter, but the current rules work well for the vast majority of people. Pension simplification was intended to introduce rules that are simple, clear and certain. Using a scheme upper limit of 25 per cent. achieves that: it benefits pension schemes by reducing administrative burdens, and individuals by making the rules easier to apply.
	The Government considered this issue when drawing up the framework that was eventually introduced on A-day, and it was recognised at the time that some individuals may not be able to claim the full 25 per cent. tax-free lump sum. Alternative methods that attempted to measure the size of multiple pension funds and calculate the relevant 25 per cent. lump sum would require pension schemes to maintain records of pensions savings before A-day. Opting for that method would require a complex and unrealistic approach to valuing pensions. Members would have to obtain or retain the values and dates of payment of all lump sum payments over a period that may be five, 10 or more years before April 2006.
	That would be a costly and time-consuming exercise. Schemes are required to keep records for only six years, and finding that information would be either impossible or costly. Our experience of other pension law, such as trivial commutation, is that such record keeping would represent significant administrative burdens. Most schemes do not have complete records and it would be unrealistic to expect members to provide that information. That is why a simple formula based on a percentage was used.
	It is also important to bear it in mind that the tax rules do not guarantee that the maximum tax-advantaged benefit can always be paid: they simply provide a framework within which a pension scheme and its members are free to order their affairs as they wish. In some circumstances, that will mean that a member will not be able to obtain the maximum tax advantages.
	The legislation deliberately does not prescribe the level of the tax-free lump sum. Instead, it provides a framework within which pension funds and individuals must operate, and that means that pension funds have the freedom to determine the appropriate package of benefits that they offer to their members. Legislating that pension schemes must provide a 25 per cent. lump sum, or allowing individuals to take a higher percentage from one fund to make up a lower percentage from another, would effectively remove the ability for pension funds to manage their affairs.
	There is nothing to stop the maximum lump sum being paid if the member and pension scheme want to reorder their affairs. It is for the pension scheme to decide what benefits it wants to pay and for the individual to decide how to take them, within the framework that the legislation provides.
	As I said, the tax rules have to cater for a large number of individuals and different circumstances. In doing so, they have to balance complexity with catering for different circumstances, and that is what the current lump sum rules do. They are simple, clear and certain, and very generous in allowing most individuals to take the maximum tax-free lump sum that they can. We also have to bear it in mind that we are talking about the tax-free lump sum only, and that the underlying pension is not affected.
	Of course the Government keep all tax policy under review, but the rules cannot cater for all circumstances and it would be unrealistic to change them to try to do so. The Government want to balance fairness and simplicity, and we think that the rules would become overly complicated if they were to accommodate the circumstances of all individuals.
	 Question put and agreed to.
	 House adjourned.